How higher education boosts productivity and growth

As thousands of students received their A-level results yesterday, the government released a study that demonstrated how higher education benefits students and significantly contributes to long-run productivity and economic growth.

The research, conducted by the National Institute of Economic and Social Research, details the economic benefits of a more highly-educated workforce and comes just days after the University and College Union produced analysis of educational attainment that showed people with higher qualifications were more likely to be in work and more likely to earn a better wage.

When speaking about A-levels yesterday, universities minister David Willetts made much of the individual benefits to students from going to university and the life-changing experience university provides, but he did not extol the benefits of having a better-educated workforce.

The research showed that around 20% of UK economic growth (from 1982 to 2005) came from increased graduate skills and that there are significant indirect benefits from higher education. Once indirect benefits are taken into account, a 1% increase in the share of the workforce with a university degree raises long-run productivity by between 0.2% and 0.5%. The research says that we can attribute at least a third of the increase in UK labour productivity between 1994 and2005 to the rising number of people with a university degree.

The report also said that there was room for greater expansion in the number of people educated to degree level. It noted that higher education expanded significantly between 1982 and 2005, and has continued to expand since 2005, but said the share of the workforce holding a university degree in the UK remains below that in Finland, the US, Japan and Canada.

The research helps make the case for greater investment in higher education and better support for the thousands of students hoping to enter university this year and is a timely reminder of the importance of a university education not only to the individual, but also our economy. Higher education is a key driver of growth and we really need to be investing in our universities and our students if we are to match our competitor countries.

There is substantial evidence that funding for colleges and universities is an investment in the country’s future, both in terms of the ability to create jobs and help deliver social and economic equity. Currently spending on tertiary education by the UK is around 1.3% of gross domestic product. This compares to the average in OECD countries of 1.6%, with the UK well below leading economies such as the USA and Korea (2.6%), Canada (2.5%), Sweden (1.8%) and Japan (1.6%). We want the UK governments to take a lead in raising funding for tertiary education to the OECD average of 1.6% of GDP.

What our supporters say

“Real vision and real courage are needed to steer this country back to economic success – education, skills and knowledge are the keys to that success. Be brave! – celebrate Britain’s international reputation for education and sell it abroad. Use education as the rudder; not something to be jettisoned overboard.”